The Federal Reserve vs. Karl Marx

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By Steve Max

As the 2016 elections approach, candidates will discuss their earnest desire for an economy that works for everyone. However, the fact is that the Federal Reserve will not allow much improvement past the present point. If the economy isn't already working for you, that is unlikely to change.   

In discussing whether the Fed will now raise interest rates to slow the economy and deliberately increase unemployment, The New York Times of 9/6/15 said, "The first question:  Is the labor market now tight enough that wage inflation is sure to follow … ?"  Now get that, "wage inflation!" You probably think it would be great if you could get a raise or a higher paid job but oh no, that would be wage inflation and it threatens the whole (Capitalist) economy.  The Fed is watching you very carefully.  

Remember what Karl Marx called the reserve army of the unemployed?  We Socialists have long maintained that strong corporate profits depend, in part, on a permanent and substantially high level of unemployment.  People can be discouraged from asking for a raise, using sick leave or family leave time, looking for a better job or even thinking about organizing a union just by knowing that someone out there is ready to do their job for less than they are. Fear is a powerful inducement to work harder and faster and to hope that the next person laid off will be the other guy.

The Times  said," At that level, [5.1% unemployment - August, 2015] joblessness is nearing the threshold that economists and the Fed consider close to full employment; inflation foes worry that allowing the unemployment rate to fall significantly below 5 percent runs the risk of leading to an overheated economy." So there you have it. To prevent wage inflation and an overheated economy, 16.3 million people need to remain unemployed, underemployed or too discouraged to look for work.

Membership in the reserve army of the unemployed was once thought to be a situation from which few people emerged. Today, the goal is to spread the misery as widely as possible so that while many families experience the pain and anxiety of unemployment, few remain unemployed long enough to want to organize and do something about it.  In August of this year, the number of people officially unemployed (had no job but looked for one in the last four weeks,) was 8 million, while the number who will experience some unemployment over the course of this year will be about 20 million. In 2014, 6.5 million families  had at least one unemployed member.

It doesn't really matter whether the Fed decides to slow the economy now or later. If the upward trend doesn't end by itself, as well it might, then the Fed will put on the breaks sometime soon. Don't blame the Fed, they didn't invent the reserve army of the unemployed. They are just following a basic principle of Capitalist economics. If the economy fails to generate sufficient unemployment, government must step in and throw people out of work.

Steve Max is a DSA Vice Chair and one of the founders of the legendary community organizing school, The Midwest Academy.

 Individually signed posts do not necessarily reflect the views of DSA as an organization or its leadership. Democratic Left blog post submission guidelines can be found here.

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